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LTV and CAC calculator, with your maximum CPC
Customer lifetime value (LTV) is the margin a customer brings in over the whole relationship: average order × orders per year × years × gross margin. Divide it by your target LTV:CAC ratio to get the most you can pay to win a customer, and multiply that by your conversion rate to get the most you can pay per click.
By Alain Abulafya, founder of PPCleaner · Updated
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Start 7 days freeHow to calculate customer lifetime value
A customer who spends $80 per order, orders 4 times a year and stays 3 years brings in $960 of revenue. At a 50% gross margin, their lifetime value is $480. Using margin rather than revenue matters: it is the margin, not the revenue, that pays for acquisition.
How to calculate CAC
Count only new paying customers, and the same period for both figures. A business that spends $12,000 in a quarter to win 100 new customers has a CAC of $120.
The LTV:CAC ratio
Dividing LTV by CAC tells you how many times a customer pays back what they cost. A ratio of 3:1 is the rule of thumb most often quoted: enough to cover overheads and grow. Below 1:1, every new customer loses money. Well above 3:1 can mean you are under-investing and leaving growth to competitors.
From CAC to the maximum CPC
If you can pay up to $160 to win a customer and 2% of clicks become customers, you can pay up to $160 × 2% = $3.20 per click. That is the ceiling to compare with the real cost of your keywords in the CPC checker. Clicks from searches that were never going to buy lower the conversion rate, and the ceiling with it.
Frequently asked questions
What is a good LTV:CAC ratio?
3:1 is the usual benchmark. Below 1:1 you lose money on each customer; between 1:1 and 3:1 you make money but have little room for overheads; far above 3:1 you could probably spend more to grow faster.
Should LTV use revenue or margin?
Margin. Revenue includes the cost of what you sell, which is not available to pay for acquisition. A revenue-based LTV makes the ratio look two or three times better than it is.
How do I estimate how long customers stay?
Divide 1 by your yearly churn rate. If 25% of customers leave each year, the average customer stays 1 ÷ 0.25 = 4 years. With little history, use a conservative figure.
Is my data stored?
No. The calculation runs in your browser.